Please ensure Javascript is enabled for purposes of website accessibility

Why Quality Systems, Inc. Shares Got Crushed

By Brian D. Pacampara, CFA - Jan 29, 2016 at 12:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Software license and hardware headwinds hit the healthcare technologist hard.

What: Shares of healthcare information technologist Quality Systems (NXGN -0.41%) were down 19.4% at 11:16 a.m. ET on Friday after its quarterly results disappointed Wall Street.

So what: Quality Systems shares have soared over the past six months on signs of accelerating top-line growth, but disappointing Q3 results -- revenue of $116.4 million versus the consensus of $125.5 million -- are forcing analysts to quickly recalibrate their growth estimates. So while earnings managed to squeak past expectations, the 25% drop in Quality Systems' software license/hardware revenue, coupled with a  gross margin decrease of 200 basis points raises plenty of concerns about its competitive position. 

Now what: Management remains confident that the company is on the right long-term strategic path. "As Quality Systems works to improve the quality of our client experience, our current growth strategy is centered on our transition to the cloud and the role our recent acquisition of HealthFusion plays, along with a strong focus on our core ambulatory business and pursuit of opportunities within the population health arena as the market shifts to the delivery of value-based care," said President and CEO Rusty Franz. "The foundation we have laid during the past few months well positions the Company for the direction in which the future of healthcare is headed." With the stock flirting with its 52-week lows and boasting a juicy 4% dividend yield, enterprising Fools might want to use today's decline to buy into that optimism. 

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NextGen Healthcare, Inc Stock Quote
NextGen Healthcare, Inc
$17.22 (-0.41%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.